Total cost: Financier Year of establishment: Value chain approach:

Case study 11 India Rural Urban Development Initiative (RUDI) NA Self-employed Womens Association (SEWA) 2004 Relational chain, intermediary-driven (intermediaries acting as Social Entrepreneurs)

Background. This womens non-profit association (SEWA) is a trade union that was established in 1972, to help poor women achieve economic security. The annual membership fee is INR 5 (about USD 0.10) and the union is open to women without a stable job and those whose livelihoods entirely depend on their own labour. Currently there are close to 1 million members in the organization, of which about two thirds are in the State of Gujarat. SEWA attempts to help women achieve at least 200 days of labour employment per year, enabling them to become economically independent with an income averaging in excess of USD 66 per month. SEWA-Gram Mahila Haat (SGMH) is the marketing organization founded by SEWA in 1999, in cooperation with the Rural Development Department of Gujarat, with the objective of eliminating middlemen and providing marketing facilities to small and marginal producers groups. SGMH facilitates producers access to technology and credit. RUDI is a for profit agribusiness company managed and owned by small farmers (companys suppliers), the Self-Help Group members, processors and the saleswomen. Intervention. SEWA members are taught to read and write, form producers associations, undertake value-addition through processing, and develop linkages with markets; they understand the pricing, quality and market requirements to negotiate more effectively with the buyers. Staff training is critical in these programmes, often determining the degree of success of a venture. Both horizontal and vertical integration are encouraged. In Gujarat, about 6,000 farmers groups with an average of 25 members each have been formed Over a period of time, SEWA realized that small farmers and rural households lacked access to markets, especially for daily consumption needs. This resulted in health problems and malnutrition. Often, the farmers couldnt rely on what they produced, themselves, due to insufficient storage space at home. Price fluctuations in the market were high. They got low prices at harvest time because of oversupply, and had to pay higher prices at other times. Moreover, SEWAs rural members often had to buy on credit as their incoming cash flows didnt coincide with their consumption needs. In this context, in 2004 SGMH initiated the Rural Urban Development Initiative (RUDI) in Gujarat, on a pilot basis. This was a private company set up to give the farmers an equity stake in the chain, allowing them to earn a fair income. The approach consisted in creating farmers organizations called District Associations (DAs) to buy produce from the small and marginal farmers, process and package it at processing centres operated by the DAs, and sell them under the Rudi brand. The Rudi brand, which was established in 2006, has been positioned in the good value for money market segment; it is known for offering the production of rural women and for being near organic in nature. At the beginning of each season, the DAs and the purchasing companies enter into contractual agreements with the buyers, specifying product name(s), quality, quantity and price. The companies include major brands in India (Amul, ITC, Cargill, NDDB). When necessary, SEWA helps producers with price negotiations and the companies are under obligation to buy all produce complying with the

contractual specifications. The DAs play an important role in improving the efficiency of the processing centre; the contractual agreements assure them of a market at a predetermined price and they help improve chain efficiency by reducing procurement and processing costs. RUDI also markets the same products in rural areas. There are four processing centers at Sabarkantha, Surendranagar, Anand and Patan. The rural distribution network is shown in Figure 1. Although targeted mainly towards women, RUDI has started to integrate men, too. RUDIs product range includes agro commodities (cereals, pulses and spices), staple goods (salt, sugar and tea) and non-farm products (incense sticks, washing powder and light bulbs). Rudi saleswomen, popularly referred to as Rudiben, sell high quality grain packets and spice pouches in the villages. Figure 1: RUDI rural distribution network
Product procurement from farmers Cleaning at processing centres in a cluster of 1520 villages Storage at Haats

Packaging and labelling at processing units

Sales outlet at every village

Finished goods at distribution hubs

Processed stock

Impact on target group. RUDI, with a reported annual turnover of USD 392,200 (in 2007), remains one of SEWAs most significant efforts in improving smallholders market linkages, particularly the poorest and women. Over 36,000 small farmers have joined organizations as producers and owners of the entire distribution network. In addition, the RUDI bazaar network, which currently covers more than 3,000 villages, is generating employment for about 4,000 rural women through processing and sales activities. RUDI saleswomen and processors are earning between USD 33 and USD 66 on a monthly basis. Members are taught to read and write, to form producers associations, to integrate vertically into processing, to link up with markets; they understand the mechanisms of pricing, quality and demand to enhance their bargaining power with buyers. Key features Effective governance. The chain is being operated by SEWA, a committed organization. Coordinated delivery of services. Performances in this respect are excellent because a single actor (SGMH) is in charge of the whole operation, drawing on the decades-long expertise of SEWA. Beneficiaries are thought to read and write, form producer associations, vertically integrate into processing, link with the market and understand pricing, quality and demand so that they may better negotiate with buyers. Value added/Vertical integration. The DAs own and manage the processing centres, thereby involving farmers directly in value addition. RUDI producers, employees and entrepreneurs are vertically integrated from the field to the retail outlets. Information flow. In order to increase the collective strength and the bargaining power of its members, RUDI provides farmers with daily information prices of the commodities through mobile

text messages. Literacy training allows all members to receive these messages. Trust. Not directly evident. Horizontal integration. In Gujarat 6,000 farmers groups have been formed (an average of 25 members each). Inter-group relations are promoted through meetings and other events. PPP. The Rural Development Department of Gujarat worked with SEWA to form the SGMH Provision of credit. This is done through self-help groups (SHGs). Member training includes advice on prudent money management and members are encouraged to open savings accounts with SEWA. Diversification. The product range is primarily agro-based (pulses, cereals, spices) but RUDI is slowly diversifying into other need-based products such as light bulbs from Bajaj Electricals, with RUDI packaging; and cellphone services using inexpensive handsets from Motorola and Idea Cellular. Capacity building. The training programmes are offered at a nominal charge. Under the Social Security Programme, SEWA encourages members to save and promotes prudent money management principles, e.g. on the pitfalls of excessive spending on public functions and weddings. Such practices have led to excessive indebtedness forcing smallholders to sell their land to big farmers and become landless laborers. Collaboration with research institutes (CSMCRI, CFTRI) enhances beneficiaries capabilities with regard to procurement, processing and quality control. Environment. The RUDI products are positioned as pro-nature and near-organic. Chain efficiency/Competitiveness. By taking middlemen out of the chain, efficiency has been enhanced. In urban areas, RUDI products sell for maximum retail price while discounts of up to 15% are given to rural customers. Inputs. SGMH, as a marketing organization, provides members with inputs (seeds, fertilizers). Market linkages. Market linkages are being created with major distribution outlets in India, such as Star Bazaar (Tata), More (Aditya Birla Group) and Reliance Fresh (Reliance Group). Sustainability. Although it is premature to judge, this intervention appears to be sustainable. Replication. The successful approach has allowed RUDI, a for-profit company, to expand its operations to 14 districts of Gujarat, in 6 states of India, as well as within Afghanistan. Recent figures show that 265,000 farmers are shareholders in the company1. Sources: th Field discussions: SEWA, Ahmedabad, 10 June 2008. Rudi website: http://www.sewarudi.com/Achivements_of_Rudi.aspx Corporate Sustainability at HSBC in India. Rudimentary Genius: Better prices for farmers, jobs for women, better products for consumers that was the idea behind Rudi. Rajiv Bhuva, Sept 2009. http://business.outlookindia.com/article.aspx?261371 Cultivating Innovation, A Discovery Framework. Prepared for Ashoka Venture and the Bill and Melinda Gates Foundation. S. Olsen and Ashokas Changemakers, Nov 2009.
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Cultivating Innovation A Discovery Framework. Prepared for Ashoka Venture and the Bill and Melinda Gates Foundation, S. Olsen and Ashokas Changemakers, Nov 2009

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RUDI Manager's School and HSBC Manndeshi Udyogini Business School, http://www.ciiskillsdevelopment.in/affirmative/hsbc.htm Long term sustainable livelihood security through RUDI, SEWA Gram Mahila Haat, Ahmedabad, http://enrap.org.in/PDFFILES/Presentation%20for%20IFAD%20meet%20-%20Shillong-SGMH.pdf